Jan. 23 (Bloomberg) -- Oil rose for the first time in four
days after the European Union agreed to ban crude imports from
Iran, raising concern that retaliation from the Islamic Republic
may disrupt the oil supply in the Middle East.

Futures gained 1.3 percent as the 27-nation bloc said it
will implement the crude embargo starting July 1 to pressure the
country over its nuclear program. Iran has threatened to close
the Strait of Hormuz, the transit point for about a fifth of
global oil, if its exports are banned.

“The EU announced this embargo and the market is taking it
as a positive,” said Tom Bentz, a director with BNP Paribas
Prime Brokerage Inc. in New York. “July 1 is close enough and
Iran may respond with more threats.”

Oil for March delivery climbed $1.25 to settle at $99.58 a
barrel on the New York Mercantile Exchange. Prices have
increased 12 percent in the past year.

Brent oil for March settlement advanced 72 cents, or 0.7
percent, to $110.58 a barrel on the London-based ICE Futures
Europe exchange.

“Today’s decisions target the sources of finance for the
nuclear program, complementing already existing sanctions,” the
EU said in a statement. The move bans imports of both Iranian
crude and petroleum products.

Iran will close the Strait of Hormuz if sanctions impede
the sale of its oil, state-run Fars news agency reported today,
citing Mohammad Kowsari, deputy head of the parliament’s
National Security and Foreign Policy commission.

‘Upside Risks’

“Iranian military action or domestic unrest could both
disrupt global crude oil flows,” Jason Schenker, president of
Prestige Economics LLC, an Austin, Texas-based energy
consultant, said in an e-mail. “As such, this means that there
are rising additional upside risks to crude oil.”

Iran will sell its crude to non-Europeans if the European
Union makes good on its decision to stop buying its oil, Kowsari
said in the Fars report.

“In the long term, the Chinese and Indians are going to
continue to purchase oil from Iran, so the embargo is more of a
reshuffle of the cards,” said Gene McGillian, an analyst and
broker at Tradition Energy in Stamford, Connecticut.

The EU bought 450,000 barrels a day of Iran’s oil in the
first half of 2011, or 18 percent of its total exports, U.S.
Energy Department data show. China accounted for 22 percent,
Japan 14 percent and India 13 percent, the department said.

NATO Response

Ivo Daalder, the U.S. ambassador to the North Atlantic
Treaty Organization, said international navies will keep the
Strait of Hormuz open in the face of Iranian threats to close
the shipping channel.

The U.K. and France have joined the U.S. in sending
warships to the Strait of Hormuz, the U.K. Defence Ministry said
in an e-mailed statement from London.

Mediterranean countries that import much of their crude
from Iran, such as Greece, Spain and Italy, had argued for
sanctions to be phased in over as much as a year. The three
nations accounted for about 68 percent of EU imports from Iran
in 2010, European Commission data show.

The EU’s decision today allows customers time to find other
sources of crude, according to the International Energy Agency,
the Paris-based adviser to 28 industrialized nations.

“The EU embargo may not impact upon actual physical
supplies until around the middle of 2012, which gives existing
customers of Iranian oil some time to line up alternative
supplies,” the agency said in an e-mailed statement.

Euro Strengthens

Oil also rose as the euro strengthened to an almost three-week high against the dollar after French Finance Minister
Francois Baroin said negotiations between Greece and its private
creditors are making “tangible progress.”

The European currency gained as much as 0.9 percent. A
weaker dollar and stronger euro increase oil’s appeal as an
investment alternative.

“We have the EU announcement and the stronger euro,” said
Tim Evans, an energy analyst at Citi Futures Perspective in New
York.

Oil volume in electronic trading on the Nymex was 379,121
contracts as of 3:58 p.m. in New York. Volume totaled 687,655
Jan. 20, 14 percent above the three-month average. Open interest
was 1.34 million contracts.